Does E-Commerce in Singapore Threaten its Malls?

With the advent of e-commerce and online shops selling anything you could ever think about buying, some fear for the safety of shopping malls. E-commerce in Singapore could especially be a threat, bringing down the malls which the country is famous for.

There have been a number of cities where e-commerce overtook the physical means of shopping. However, in-depth research into the shopping behaviors and statistics of Singaporean shoppers prove that physical stores’ performance has improved. Malls are here to stay with e-commerce actually augmenting sales.

There are four main reasons why experts think shopping malls will stand strong in Singapore.

Online and Offline Retail Worlds are not Really Competitors

Singapore is no different from all other countries in the world. With the advent of the digital age, its e-commerce sector is booming. Boasting staggering growth of nearly 50% in the past two years, the online retail market in 2015 is estimated to be worth SG$4.4 billion.

The much smaller e-commerce retail scene might showcase incredible growth rates. But physical in-store sales comes out to be the champion in this matchup.

An enormous market valued at SG$52.4 billion in 2015, in-store retail sales have shown strong CAGR growth of 8.3% over the past two years and show no signs of stopping. To put things into perspective, only 4% of household spending is done online in Singapore.

E-Commerce in Singapore is Still at an Early Stage

Singapore is home to a very late e-commerce scene. Much fewer things are done online relative to other countries such as the US and UK. The research looked at three key metrics to measure how advanced a country’s e-commerce is.

First, only 49% of Singaporeans book their flights online, falling way behind the UK’s 80%.

Secondly, the proportion of hotel bookings was examined. In comparison to the 73% in the US, only 40% of Singaporeans are using the internet to book their hotel rooms.

Lastly, apparel purchases online are at an alarmingly low 4% of all purchases. This is a significant indicator because the majority of online shops on the market are selling apparel.

Shopping is a Huge Part of Singaporean Culture

According to Letty Lee, CBRE’s Retail Director and an expert on real estate in Singapore, “Singapore is a shopping nation. Shopping isn’t just about buying something, it is about socializing and experiencing.”

Singapore has developed its shopping culture to an extent that many of its citizens prefer spending the time in malls rather than browsing on the internet. It’s not just about buying stuff, but also the experience of “shopping”.

85% of all Singapore denizens shop in stores at least once a month. This is compared to 49% of consumers who shop online.

To put things into perspective, Singapore has twice the retail space per person than Australia. This is despite Singapore being 10,000 times smaller.

Physical Stores Have Irreplaceable Features

There are some things the internet and all the technology in the world will never replace.

Physical locations offer shoppers the opportunity to socialize with their friends and enjoy the atmosphere of a mall. This cannot be replicated for a person just browsing through the net.

The malls themselves are aware of the fact they’re here to stay. As such, management is looking for ways to augment the strength of malls with the technology of online shops. Their goal is to create an “omnichannel” integrating both online and offline shops.

Some of the projects retailers started include Magic Mirrors where a shopper can virtually try on items.“Click-and-mortar” stores put QR codes on their wares so that shoppers can scan them, and later add them to their online shopping carts to buy.

Online shopping may be disruptive to physical stores in other places. E-commerce in Singapore will co-exist with the nation’s malls though.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.